Question

Find an article relating to Time Value of Money or Asset Valuation techniques from any medium, briefly summarize the article, explain how you found the article particularly useful or timely, and give your personal reactions to the article. Be sure to provide the title of the article, the author(s), and the reference for the article.

Answer 1

The title of the article is : The Time Value of Money

Author: Michael

Reference: http://stretchadime.com/time-value-of-money/

In this article the author tried to explain the concept of time value of money with the example of a person who wants to buy a car and has two options through which he/she can buy the same. It is always said that a dollar in hand today is always better than a dollar tomorrow as due to inflation and other costs the same amount reduces its real value. In this article the author explained that if one buys a car on EMI rather than buying it with a immediate cash down payment will always be expensive since that EMI will come with a interest cost and that interest will anyways increase the cost of buying the car along with reducing the value of today's dollar which one pays. He explained the same through using concepts such as present value and future value. In normal finance we always discount the future value with a discounting factor (rate of interest) to arrive at the present value of dollar that we are going to spend in the future. The present value of the future value of any dollar is always lesser.